Redefining social responsibility

That the multinational sportswear company Adidas should buy socks from a Chinese sweatshop that employs children is hardly news. Brand-name apparel firms are notorious for exploiting third-world workers.

But change is afoot when Adidas pays independent investigators to uncover such human rights abuses, voluntarily publicizes them on a website, and insists that its supplier shape up.

Adidas is one of seven multinational clothing and footwear companies whose overseas operations are scrutinized in a groundbreaking report just published by the Fair Labor Association (FLA), a Washington-based coalition of businesses, labor rights activists, and US universities.

"This marks a breakthrough in corporate accountability to the public," says FLA Executive Director Auret van Heerden in Geneva. "Working together, companies and critics have taken a big step beyond talking about social responsibility and are starting to get the facts into public view."

It has taken a while. The idea for the FLA was born seven years ago, in the wake of a public outcry in the US over Wal-mart's use of child labor in Honduras. The group was founded by Adidas-Salomon, Levi Strauss, Eddie Bauer, Liz Claiborne, Nike, Phillips-Van Heusen, and Reebok, working alongside human rights activists.

Their first public report details violations of labor, environmental, and health and safety standards - ranging from the shocking to the mundane - in factories that supply brand-name labels from Vietnam to Mexico.

One firm in the Philippines that makes jeans for Levi Strauss was found by independent auditors to deduct 30 percent of a seamstress's wages if she arrived 31 minutes late for work. The Hong Kong sweatshop supplying socks to Adidas employed children,fired its workers if they didn't show up for five days, and withheld 60 percent of their wages until the end of the year to stop them from leaving.

An Indonesian firm making goods for Reebok didn't think it necessary to put finger guards on sewing machines. Chinese factories routinely confiscate new workers' residency papers, making it hard for them to leave.

Equally important, however, the report's "tracking charts" also set out the steps that suppliers have taken to correct their faults. "When we find violations, as we inevitably do, we want the companies to fix them, to improve their suppliers' performance, not just to walk away," says Mr. van Heerden. "Too many companies just end their contracts with a supplier when they find violations: our message is 'don't terminate, remediate'."

"This is not a 'gotcha' system," adds Michael Posner, head of the Lawyers Committee for Human Rights in New York, and an FLA board member. "We know there are problems. The point is to remedy them."

Even that reluctance to apportion blame, however, has not yet attracted many brand-name companies. Only 13 are currently in the program, including just one retailer, Nordstrom.

"Our system is very demanding," says van Heerden. "We are asking brands to take responsibility for the entire supply chain, regardless of whether they own the suppliers. It's a huge undertaking, and not that many companies are ready to do it."

Van Heerden is particularly concerned that some companies who could be interested in boosting their brand's reputation by promoting social responsibility are put off by the costs.

"When companies are run by accountants who are concerned more with quarterly figures than with long-term factors, it's a hard sell," he says.

Increased public pressure is the key, he believes, and that's where the 179 US universities that have joined the FLA come in. When they are fully involved in the program, they will demand that every item marked with a logo sold anywhere on their campuses must come from a supplier that is open to FLA monitoring of its standards.

Not only is that expected to bring hundreds more companies up to scratch, it will also help the FLA educate factory managers in countries such as Turkey, El Salvador, and China about American consumer expectations.

Van Heerden tells the story of a Korean-owned cap factory in the Dominican Republic, supplying Nike, Reebok, and Adidas, whose owners were crushing attempts to form a union by firing all the activists.

"The manager said he had fired them because they had been eating cake" during working hours, the FLA director recalls. "He had no idea how that sort of attitude would appear to US consumers. Students would have gone ballistic."

A year of FLA mediation between workers and management at that plant led not only to the creation of a union, but to a 10 percent wage rise. And it was not only the workers who benefited: three major brands no longer risked a scandal denting their most valuable asset: their image.

Those risks, argue advocates of social responsibility, mean that third-world governments who think they can attract foreign investment by lowering labor standards are wrong.

On the contrary, Cambodia discovered that raising labor standards can be good for business.

When the government there signed a trade deal with the US in 1999, making an increase in garment export quotas contingent upon compliance with International Labor Organization standards, foreign companies were glad of that incentive. Nike returned to Cambodia, having canceled earlier contracts there because of a child-labor scandal, and Gap began buying from local suppliers for the first time.

That suggests that in the end, the best way to protect workers' rights in developing countries is for governments to write good legislation and enforce it. "In many ways we are a stopgap response to the lack of enforcement," van Heerden acknowledges.

"The biggest difficulty is that the apparel industry as a whole operates in places where there is simply not enough protection" for workers, adds Mr. Posner. "But right now, the FLA is a way to begin to get at the problem."